Fine Print - April 2008

Minding market forces

By G.D. Gearino

Perhaps you look at the embarrassing debacle in Roanoke Rapids involving the publicly financed theater overseen by Randy Parton and think, “Well, when you lie down with third-tier country singers, you get up with a huge debt andpublic scorn.” I look at that same mess and think, “Did we learn nothing from Global TransPark and the North Carolina Information Highway?”

We are thick with newcomers in North Carolina, so it’s possible that many residents of the state don’t know about the TransPark and Information Highway. It’s equally possible that longtime residents have no recall of those projects, which can be attributed less to senility and more to the mind’s wondrous ability to purge itself of memories of financial trauma. To the first group, let me now explain one of the more inglorious periods in your new home’s history, when politicians flush with cash found two novel ways to burn through an impressive pile of it. To the second group, I apologize for dredging up buried horror.

Actually, Global TransPark — the cargo airport/industrial park that was created in the early 1990s to attract jobs to Eastern North Carolina — was in the news earlier this year. It seems it’s unable to repay $25 million it borrowed from the state more than a decade ago (an amount that with interest has grown to $33 million). Even worse was the subsequent news that a company touted as a key player in the park’s business plan hadn’t been able to pay rent and had been given the bum’s rush. Public investment in GTP to date is — depending on how you count it — well over $100 million. The park’s latest funding summary shows that the federal government has contributed $29.9 million while the state has kicked in $57.2 million, for a total of $87.1 million. Additionally, Kinston and Lenoir County pledged $10 million for water and sewer improvements. Don’t forget the $33 million outstanding loan, plus public funds given as incentives to companies to move there and the value of Kinston Regional Jetport, $17.7 million when it was turned over to GTP.

The point here is that state leaders made a mistake so obvious that any Junior Achievement dropout could have avoided it. They provided the supply where there wasn’t (and clearly still isn’t) demand for an industrial air park in a remote, rural area (cover story, July 2007). Meanwhile, the N.C. Information Highway should have provided a second lesson: Don’t seek to create something the market can create more quickly and cheaply.

The Information Highway was unveiled in 1993 when then-Gov. Jim Hunt declared that the proposed broadband network “will reach into every corner of our great state. It will connect our cities with our towns, our schoolhouses and our courthouses, our hospitals and clinics — our people all across the state.” But as details trickled out, the highway seemed less like a marvel and more like a money pit. For instance, the cost of connecting the public schools to the network alone was estimated at $500 million. What was worse, it turned out that the public/private partnership that would build the highway broke down this way: Taxpayers would help underwrite the cost to build it and pay top dollar to use it, and the telephone companies would own it.

Three years later, an assessment by the state controller’s office concluded that the cost was high, technical problems were many and the number of practical applications was low. Still, the controller’s office declared it was worth the effort: “While the natural forces of the marketplace may have produced such a development over time, it would have been much slower in coming and would probably not have reached the remote parts of the state that need it the most.” What glories would the Information Highway bring? Here are two culled from the report: “Citizens renewing licenses online 24 hours a day” and “Developers electronically submitting applications for permit approvals.”

Yep, you can do stuff like that, and more, these days — thanks to the advances in technology and deregulation that spurred the growth of the Internet. In fact, two years before that report, you could have ordered a pizza online from Pizza Hut. Needless to say, not only were “the natural forces of the marketplace” not slow, we can thank providence that they were fast enough to make many aspects of the Information Highway obsolete before bureaucrats threw even more millions onto the table.

This brings us back to The Randy Parton Theatre, now known as The Roanoke Rapids Theatre — that being home to the performance hall built with $21.5 million of public money and site of the outlet center that may well replace it someday. I know it’s tough to be a city leader in a place like Roanoke Rapids, which has found itself ailing and desperate for any idea that might reverse its economic fortunes. But the market is a pitiless place and does not issue exemptions to the basic laws of supply and demand. Like Global TransPark, the theater was built in the hope that business would follow. But unlike the Information Highway, there’s no realistic hope that the demand for a country-music theater will suddenly swell, thus keeping more good money from being thrown after bad.